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Smaller stores pay off for Lewis – Business Report

May 24, 2011

Furniture retailer Lewis Group’s strategy to open smaller-format stores in high-density trading areas is paying off by generating sales on a par with bigger stores, but at significantly lower cost.

This, along with new merchandise, better credit sales and higher collections, helped the group perform well in the year to March.

Forty new stores were opened in the year, increasing its store base to 582. This included 21 Lewis stores, of which 17 were smaller formats. In the current year 25 small Lewis stores will be opened out of a total of 40 new stores.

Johan Enslin, the chief executive of Lewis Group, said yesterday that the smaller stores, which were launched three years ago, cut manpower in half, but their sales compared favourably with big stores.

The small stores have a floor area of about 250m2 compared with the larger format’s 400m2 and they stock fewer lines, with the balance displayed in store through an online catalogue.

The group’s strong performance was also attributed to the introduction of new ranges twice a year as opposed to once a year previously. Merchandise sales rose by 12 percent to R2.3 billion and revenue increased 11.4 percent to R4.6bn.

Group headline earnings a share increased 21.6 percent to R7.81. Credit sales as a percentage of total sales grew from 68.5 percent to 71.4 percent.

Furniture and appliance sales increased by 12.1 percent and electronic goods sales by 11.9 percent. Merchandise sales in the flagship Lewis brand, which comprise 84 percent of total sales, rose by 12.6 percent. Best Home and Electric improved sales by 17.9 percent.

The shares rose 0.54 percent to R77.01 on the JSE yesterday.